April 15 is the last day to set up a Health Savings Account and get a 2018 deduction for doing so as long as you’re not eligible for Medicare (age 65).
You need to have an eligible Health Savings Account medical insurance policy on or before Dec. 1, 2018. That policy must have a deductible of at least $1,350 if you’re single. The deductible must be at least $2,700 if the policy covers you and your family members (i.e. spouse, children).
The contribution to pay in by April 15 or earlier in 2019 for the Health Savings Account deduction in 2018 is $3,450 if you’re single. The family contribution (for married couples) is up to $6,900. And, if you were age 55 or older in 2018, the contribution can be increased $1,000 more. If it’s for a family policy and you both were age 55 or older in 2018, the increase is $2,000.
The money in a Health Savings Account will earn tax free (if it’s spent for medical expenses). You don’t have to use it now, it can be held for you to pay medical expenses years in the future.
When you pay medical expenses (or get reimbursed for medical expenses you paid) the withdrawal isn’t subject to income tax.
That’s a deduction for putting money in the HSA — but withdrawals aren’t taxable when you spend them for medical expenses! That’s a good tax benefit!
Also, you have until April 15 to pay into a regular, traditional, deductible Individual Retirement Account (IRA). If you’re not enrolled in a retirement plan where you work, and you have enough wages, or sole owner profits, you can contribute and deduct up to $5,500 ($6,500 if you are age 50 or older in 2018) on your 2018 return. If you’re married and neither of you have a retirement plan at work, you can each do a 2018 IRA contribution (by April 15, 2019) plus the extra $1,000 for those ages 50 or older in 2018.
However, special rules apply if you have a retirement plan at work. Single taxpayers with a retirement plan at work start to lose the opportunity to contribute if you have Adjusted Gross Income (AGI) of $63,000. Married couples filing a joint return that have a retirement plan at work have the deduction start to “phase out” if the Adjusted Gross Income is $101,000.
For married couples where only one person has a retirement plan at work, the spouse who’s not covered by a retirement plan can contribute and deduct the maximum contribution if the joint return Adjusted Gross Income is less than $189,000. If the AGI is less than $199,000, then a partial deduction is available. April 15 is really a day of opportunity for you to save 2018 income tax.
Did you hear “Life is short. Eat dessert first!”
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.